It is well known that most electrical loads, in particular motors and fluorescent lights, present a load to the power mains that have an inductive component besides the purely resistive component. The reactive component draws a current that is out of phase with the resistive component, i.e. for inductive loads the current lags the voltage by a certain phase angle. As a result, inductive loads draw a certain amount of current for which the user pays the power company, but is of no use to him, since the inductive component of the current does not represent any useful power, but only loss in power wiring and in the load.
This inductive load component is commonly referred to as the "power factor" of the load. The power factor is defined as the cosine of the phase angle between the voltage vector and the current vector. A large power factor, as close to one as possible is desired, while a small power factor indicates an inefficient coupling between the load and line.
The major loads in large households, business establishments, office buildings, factories, and so on are mostly inductive, e.g. motors driving air conditioner, pumps, machinery and also fluorescent and other electric arc type lights having a large inductive component.
It is also well known that a capacitive load of the proper value applied in parallel with an inductive load generates a capacitive current that leads the voltage vector and thereby is capable of cancelling the inductive component of the current.